MANU/DE/9616/2007

IN THE HIGH COURT OF DELHI

I.A. No. 7987/2004 in Suit No. 542/2004
Decided On: 30.04.2007
S.C. Gupta Vs. Allied Beverages Co. Pvt. Ltd.
Hon'ble Judges/Coram:
Gita Mittal, J.
Counsels:
For Appellant/Petitioner/plaintiff: Rajesh Mahajan and Ajay Raghav, Advs.
For Respondents/Defendant: T. Nath and J.P.N. Shahi, Advs.
Case Note:
Limitation - Maintainability - In suit for recovery of an amount filed by
Plaintiff, Defendant had entered appearance on receipt of summons - Hence,
this Application - Whether, Application for leave to defend suit was
maintainable or barred by limitation - Held, Plaintiff had accepted that service
of advance copy was not adequate service upon Defendant as it had permitted
Joint Registrar to pass an order for issuance of summons for judgment against
Defendant in prescribed proforma- Further, Plaintiff also filed requisite
process fee for issuance of summons for judgment which was issued to
Defendant - Therefore, objection of Plaintiff based on service of advance copy
of Application for summons was rejected - Moreover, Defendant had received
summons for judgment and thereafter filed Application on 13th October, 2004
and there was no material available on record to contrary - Thus, Application
was maintainable.
Banking - Maintainability - Section 2(9) of the Punjab Registration of Money
Lenders' Act, 1938 - Whether, Act of 1938 applied to transactions between
Plaintiff and Defendant - Held, Act of 1938 had applicability only in respect of
and against persons of firms who were engaged in business of advancing
loans under the Act - Loan advanced by a trader to trader in regular course of
business, in accordance with trade usage could not be covered under
definition of loan - Further, it was found that Plaintiff had contested claim of
Defendant that amount given to it was advanced by Plaintiff as a Director of
company - Further, investment was made by Plaintiff in capacity of director of
Defendant-company in form of loan to company - Moreover, there was no plea
in Application that Plaintiff was a money lender by profession within meaning
of expression under Section 2(9) of Act - Therefore, Plaintiff was not in
business of money lending and that suit was maintainable.
Limitation - Maintainability - Section 18 of the Limitation Act, 1963 and Order
37 of the Code of Civil Procedure, 1908 (C.P.C.)- Whether, money claimed by
Plaintiff was debt or liquidated demand under contract and whether, suit filed
under Order 37 of C.P.C. was within limitation - Held, from Plaint and
documents placed on record, it was apparent that Plaintiff had advanced
amounts to Defendant - Apart from admissions and clear and unequivocal
acknowledgement contained in balance sheets, perusal of record showed that
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first payment by Plaintiff was made to Defendant and partial payment on
account of debt was made before expiry of prescribed period of limitation
computed from date of Plaintiff's payment - Acknowledgment of Defendant
amounted to a promise to pay Plaintiff towards loan- Since, each payments
were within three years of last payment, limitation could not commence on
expiry of prescribed period from date of issuance of each cheque - Moreover,
Defendant had failed to abide by MOU and there was no estimate involved in
amount reflected by company as its owings to other persons - Further, there
could be no prohibition to maintainability of suit on ground that Plaintiff had
incorporated a prayer for pendente lite and future interest - Defendant had
failed to raise triable issue or bonafide or reasonable defence to case of
Plaintiff as he had not disclosed any fact which could be considered sufficient
to entitle him to leave to defend suit - On the other hand Plaintiff had proved
liability from documents executed by Defendant itself - Therefore, objections
of Defendant regarding maintainability on ground of limitation as well as no
liability of payment were without merit and could be set aside - Application
dismissed.
Ratio Decidendi:
"Where acknowledgment of existence of debt is made before expiry of period
of limitation, a fresh period of limitation shall commence."
JUDGMENT
Gita Mittal, J.
1 . By this order, I propose to dispose of this application which has been filed by the
sole defendant under Order 37 Rule 3(5) of the Code of Civil Procedure, 1908 praying
for leave to defend the present suit which has been filed under the summary procedure
provided under Order 37 of the Code of Civil Procedure, 1908.
2. The suit has been filed by the plaintiff on the averments that the plaintiff, Shri S.C.
Gupta, was carrying on a business of interior contractors as a sole proprietor under the
name and style of M/s S.C. Gupta & Bros. The plaintiff had good relations with Shri
Surender Sadhu, a Director in the defendant, a company incorporated under the
provisions of the Companies Act, 1956. On account of such good relations, the plaintiff
also remained as a Director in the defendant company with effect from 31st May, 2000
till 31st January, 2002.
3 . The plaintiff advanced to the defendant several amounts as loan account payee
cheques or demand drafts between the period 16th December, 1998 to 13th September,
2000 totalling an amount of Rs. 41 lakhs. The amount which was advanced by the
plaintiff was reflected and acknowledged by the defendant as such loan in their books of
account, balance sheets and profit and loss accounts, which were prepared and filed
before the Registrar of Companies as well as the income tax authorities.
4 . In partial discharge of its liability, the defendant paid an amount of Rs. 4 lakh by
way of cheque in September, 2000 which was credited to the plaintiff's account on 16th
September, 2000. Further loan was requested and between 21st September, 2000 and
25th April, 2001, the plaintiff advanced a further amount of Rs. 37,30,000/-. Details of
payments made to the defendant by the plaintiff have been detailed in para 5 of the
plaint. Thereafter, the defendant repaid a sum of Rs. 1.50 lakhs by two cheques dated
2nd March and 15th March, 2001. At the time of filing of the suit, the defendant was
owing a sum of Rs. 72,80,000/- to the plaintiff for which the plaintiff filed the suit on
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26th March, 2004.
5. After the suit was filed on 29th March, 2004, the plaintiff filed an application being
I.A. No. 4876/2004 seeking amendment of the plaint to incorporate certain subsequent
events/developments which have taken place after the filing of the suit. This application
was allowed on 5th August, 2004. By way of the amendment, the plaintiff has brought
on record the fact that on 31st March, 2004 and 1st of April, 2004, Shri Surender
Sadhu, Managing Director of the defendant approached the plaintiff to settle the
outstanding loans. He requested that the defendant was not in a position to repay the
entire amount of Rs. 72,80,000/-and expressed the desire to make payment in a full
and final settlement of its dues by payment of Rs. 47,00,000/-
6. With a view to maintaining good relations, the plaintiff agreed to this proposal and
the parties signed a Memorandum of Understanding dated 1st April, 2004. Pursuant to
this Memorandum of Understanding, the defendant issued cheques to the plaintiff,
however, the cheque dated 5th April, 2004 issued by the defendant in terms of the
Memorandum was dishonoured on account of insufficiency of funds in the defendant's
account. The plaintiff consequently has pleaded that this Memorandum of Understanding
is not binding on the plaintiff. The plaintiff in the amended plaint has restricted the
liability of the defendant to Rs. 43,80,000/-.
7 . The plaintiff has placed strong reliance on the letter dated 2nd September, 2001
whereby the defendant acknowledged an amount of Rs. 64,30,000/- as outstanding and
payable to the plaintiff on 31st March, 2001. After 31st March, 2001, the plaintiff
advanced a further loan of Rs. 8,50,000/- to the defendant. The defendant issued three
cheques to the plaintiff; one dated 17th February, 2004 and two cheques, each dated
8th March, 2004, for the total sum of Rs. 17,00,000/- to the plaintiff in partial discharge
of its liability. When presented for encashment in February and March, 2004, these
three cheques were dishonoured by the bank with the remarks that the account stood
closed. These cheques were dishonoured on 19th February, 2004 and 9th March, 2004
respectively giving rising to the cause of action for the plaintiff to file the present suit.
8 . Basing its claim also on the acknowledgement in the balance sheet and profit and
loss account for the financial year ending 31st March, 1999, 31st March, 2000, 31st
March, 2001 and 31st March, 2002, the plaintiff originally filed the suit on 26th March,
2004 for a principal sum of Rs. 72,80,000/-.
9 . The defendant entered appearance on receipt of summons in the suit. The plaintiff
thereafter sought summons for judgment to be issued in the prescribed form. The
present application has been filed on 13th of October, 2004 seeking leave to defend.
10. A preliminary objection has been taken by the plaintiff to maintainability of this
application on the ground of limitation. Before dealing with the pleas of the defendant
in the application, it would be appropriate to consider this objection. The advance copy
of the I.A. No. 6307/2004, whereby the plaintiff had sought issuance of summons for
judgment, was served upon counsel for the defendant against receipt on 20th
September, 2004. Based on this service, it is urged that the leave to defend ought to
have been filed within ten days thereof on or before 30th September, 2004. The same
having been filed on 13th October, 2004, according to the plaintiff the present
application seeking leave to defend is barred by limitation. Reliance is placed on the
pronouncement of this Court reported in MANU/DE/0023/1992 : AIR 1992 Delhi 159
Projects and Equipment Corporation of India Ltd. v. H.C. Suri and Ors.
1 1 . I find that I.A. No. 6307/2004 was listed before this Court on 2nd September,
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2004. The plaintiff accepted that service of advance copy was not adequate service upon
the defendant inasmuch as it has permitted the Joint Registrar to pass an order for
issuance of summons for judgment against the defendant in the prescribed proforma,
returnable on 12th October, 2004. The plaintiff also filed the requisite process fee for
issuance of summons for judgment which was thus issued to the defendant. In this view
of the matter, the judgment in Projects and Equipment Corporation of India Ltd. (supra)
would have no application inasmuch in that case, the defendant No. 1 had accepted
service of the copy of the application for the same and annexures thereto as service of
summons for judgment and consequently, the court had issued summons for judgment
only to the remaining defendants. In this view of the matter, the objection of the
plaintiff based on this service of advance copy of the application for the summons is
hereby rejected.
12. The plaintiff has taken yet another objection for urging that the present application
is barred by limitation. Placing reliance on the affidavit of service dated 8th October,
2004 filed by it, the plaintiff has asserted that the defendant was served with the
summons for judgment on 25th September, 2004. The plaintiff along with this affidavit
has placed the receipt given by the courier company purporting to be duly receipted by
the defendant. Perusal of the receipt which has been enclosed with the affidavit shows
that there are no signatures where the particulars of the consignee/addressee are to
appear. This cannot be accepted as valid proof of service for summons of judgment on
25th September, 2004. Furthermore, on 22nd September, 2004, the court had directed
service by registered cover A.D. as well as by courier. The plaintiff did not file a
properly and duly stamped registered cover and for this reason, the summons could not
be issued by registered post. In this view of the matter, I am not inclined to accept the
contention of the plaintiff that the defendant was served with the summons for
judgment on the 25th of October, 2004 and for this reason, the application for leave to
defend filed on 13th October, 2004 is barred by time.
13. The defendant has contended that he received the summons for judgment on 4th
October, 2004 and has filed the application on 13th October, 2004. There is no material
on record to the contrary. I am therefore inclined to accept the contention of the
defendant on this ground and reject the objection of the plaintiff to the effect that this
application deserved to be rejected on the ground that the same is barred by limitation.
14. So far as the grounds on which leave to defend has been sought by the defendant,
by way of the present application, the defendant raises the following pleas:
(i) the suit of the plaintiff is barred under the provisions of Punjab Registration
of Money Lenders' Act, 1938.
(ii) The money claimed by the plaintiff is not a debt or a liquidated demand
under contract and consequently, the present suit filed under Order 37 of the
Code of Civil Procedure, 1908 is not maintainable.
(iii) The suit claim is barred by limitation inasmuch as each cheque allegedly
paid by the plaintiff was an independent transaction and consequently gave rise
to independent causes of action. The suit having been filed more than three
years beyond the date of the cheques is barred by limitation.
1 5 . I heard learned Counsels for the parties at great length and have given my
considered thought to the rival contentions. I first take up the objection of the
defendant that the suit is barred by the provisions of Punjab Registration of Money
Lenders' Act, 1938 for consideration. The first question which arises is as to whether
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this enactment applies to the transactions between the plaintiff and the defendant. The
Act has been enacted to regulate the business of money lenders and was effectuated in
order to register money lenders for this purpose. The expression 'money-lender' is
statutorily defined under Section 2 Sub-section 9 thus:
Section 2(9): "Money-lender" means a person, or a firm carrying on the
business of advancing loans as defined in this Act, and shall include the legal
representatives and the successors-in-interest whether by inheritance;
assignment or otherwise, of such person or firm; provided that nothing in this
definition shall apply to
(a) a person who is the legal representative or is by inheritance the
successor-in-interest of the estate of a deceased moneylender together
with all his rights and liabilities; provided that such person only
(i) winds up the estate of such money-lender;
(ii) realises outstanding loans;
(iii) does not renew any existing loan, nor advance any fresh
loan;
(b) a bona fide assignment by a money-lender of a single loan to any
one other than the wife or husband of such assignor, as the case may
be, or any person, who is descended from a common grandfather of the
assignor.
It is therefore apparent that this statute would have applicability only in respect of and
against persons of firms who are engaged in the business of advancing loans as defined
under the Act. The expression 'loan' is defined under Sub-section 8 of Section 2. 'Loan'
has been defined to mean an advance, whether secured or unsecured, of money or in
kind at interest and shall include any transaction which the court finds to be in
substance a loan. Certain exceptions to this definition has been carved out and under
Sub-clause (vi) of Sub-section 8 of Section 2 it is specifically stipulated that a loan
advanced by a trader to a trader in the regular course of business, in accordance with
trade usage shall not be covered under the definition of the loan.
16. I find that in this application, apart from a bald allegation that the suit is barred
under the Punjab Registration of Money Lenders' Act, 1938, there is nothing further. I
find that the plaintiff has contested the claim of the defendant that the amount given to
it was advanced by the plaintiff as a Director of the company. Even assuming that the
investment was made by the plaintiff in the capacity of a director of the defendant-
company in the form of a loan to the company. I find that there is no plea in the
application that the plaintiff is a money lender by profession within the meaning of
expression under Section 2(9) of the statute.
17. In MANU/PH/0084/1952 : AIR 1952 Punjab 207 Amar Singh v. Kuldeep Singh, it
was held by the court that a man does not become a 'money lender' merely by reason of
casual loans to relations, friends or acquaintances, whether interest be charged or not
nor does a man become a money lender merely because he may, upon one or several
occasions, lend money to a stranger. There must be a business of money lending and
the 'business' imports the notion of system, repetition and continuity to be covered
under the definition of money lender under this statute.

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1 8 . This very issue has arisen for consideration before this Court and in the
pronouncement reported at MANU/DE/0098/1972 : AIR 1973 Delhi 44 S.L. Luthra v.
Narender Kumar Puri, the court held thus:
5 . The petitioner through his affidavit raised such pleas which can easily be
raised in respect of any suit brought on the basis of a promissory note. In his
affidavit no instances of money lending by the plaintiff-respondent were cited.
It is open to a defendant in every suit brought on a promissory note to plead
that the plaintiff is a money lender and has not been submitting six monthly
statements of account which a registered money lender is to submit.
In suits covered by Order 37, Rule 2 of the Code every possible care should be
taken by the trial Courts in coming to the conclusion whether the issues raised
are triable or not. There should be a further finding whether the defence raised
is bona fide or not. The Court is not to be impressed by mere assertions,
whether of facts or of law. The Court must examine the merits of all the
contentions raised in order to obtain leave to defend that suit. Unless the trial
Courts act strictly in accordance with the requirements of Order 37 of the Code
the provisions contained therein may be rendered ineffective.
It is noteworthy that the defendant has failed to place even a single instance of money
lending transaction by the defendant on the record of the present case and has made
merely a bald allegation unsupported by any material. In this view of the matter, the
pleas raised by the defendant are certainly insufficient to hold that the plaintiff was in
the business of money lending and that the suit was not maintainable for the reason
that the plaintiff was not registered under the Punjab Registration of Money Lenders'
Act, 1938.
19. It now becomes necessary to consider the second and third objection raised by the
defendant to the maintainability of the suit on the ground that the same is not based on
a debt or a liquidated demand or on a written contract and could not be filed under
Order 37 of Code of Civil Procedure, 1908 and that the claim is barred by limitation.
Inasmuch as these objections are based on the same documents and legal submissions
they are required to be considered together.
20. From the plaint and the documents placed on record, it is apparent that the plaintiff
advanced amounts to the defendant between the period 16th December, 1998 to 13th
September, 2000. The plaintiff became a director of the defendant-company and
remained its director with effect from 31st May, 2000 till 31st January, 2002. From the
statements of accounts placed before this Court, it is evident that the plaintiff has made
payments to the defendant before the date he became the director of the defendant and
even thereafter.
21. Before this Court the plaintiff has placed certified copies of the balance sheet duly
certified by a chartered accountant. Perusal of the balance sheet of the defendant-
company as on 31st March, 1999 shows that it was owing an amount of Rs. 17,00,000/-
to Shri S.C. Gupta who has given unsecured loan in the category of 'unsecured loans
from others' as on 31st March, 1999. The amount due to the plaintiff has been so
reflected even in the balance sheet of 31st March, 2000 and the same amount has been
shown. As on 31st March, 2001, Shri S.C. Gupta is shown to have advanced an
unsecured loan of Rs. 62,30,000/- while in the balance sheet as on 31st March, 2002,
Shri S.C. Gupta is shown to have advanced unsecured loan to the tune of Rs.
72,80,000/-.

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Thus, the amounts payable to the plaintiff are not reflected by the defendant under the
column of loans from directors but under the category of "unsecured loans from others"
The submission that the plaintiff had advanced money as a director of the company is
therefore wholly without merit and fallacious.
22. These acknowledgements in the balance sheets of the owings to the plaintiff have
been relied upon by it for two purposes. Mr. Rajesh Mahajan, learned Counsel for the
plaintiff has urged that such acknowledgements would be covered within the meaning of
expression 'debt' so as to enable the plaintiff to base the suit on the same. It has been
secondly urged that such debt shown in a balance sheet of a company is an
acknowledgement within the meaning of Section 19 of the Limitation Act.
2 3 . Section 18 and 19 of the Limitation Act which have bearing on the respective
contentions of the parties read thus:
18. Effect of acknowledgment in writing
(1) Where, before the expiration of the prescribed period for a suit or
application in respect of any property or right, an acknowledgment of
liability in respect of such property or right has been made in writing
signed by the party against whom such property or right is claimed, or
by any person through whom he derives his title or liability, a fresh
period of limitation shall be computed from the time when the
acknowledgment was so signed.
(2) Where the writing containing the acknowledgment is undated, oral
evidence may be given of the time when it was signed; but subject to
the provisions of the Indian Evidence Act, 1872(1 of 1872), oral
evidence of its contents shall not be received.
Explanation:- For the purposes of this section
(a) an acknowledgment may be sufficient though it omits to
specify the exact nature of the property or right, or avers that
the time for payment, delivery, performance or enjoyment has
not yet come or is accompanied by a refusal to pay, deliver,
perform or permit to enjoy, or is coupled with a claim to set-
off, or is addressed to a person other than a person entitled to
the property or right;
(b) the word "signed" means signed either personally or by an
agent duly authorised in this behalf; and
(c) an application for the execution of a decree or order shall
not be deemed to be an application in respect of any property
or right.
1 9 . Effect of payment on account of debt or of interest on legacy - Where
payment on account of a debt or of interest on a legacy is made before the
expiration of the prescribed period by the person liable to pay the debt or
legacy or by his agent duty authorised in this behalf, a fresh period of limitation
shall be computed from the time when the payment was made:
Provided that, save in the case of payment of interest made before the

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 1st day of January, 1928, an acknowledgement of the payment appears
in the handwriting of, or in a writing signed by, the person making the
payment. Explanation - For the purposes of this section
(a) where mortgaged land is in the possession of the
mortgagee, the receipt of the rent or produce of such land shall
be deemed to be a payment;
(b) "debt" does not include money payable under a decree or
order of a court."
24. My attention has been drawn to the judgment of the Gujarat High Court reported at
MANU/GJ/0087/1964 : AIR 1964 Gujarat 208 Ambika Mills Ltd., Ahmedabad v.
Commissioner of Income Tax, Gujarat, wherein the court has held that a debt shown in
a balance-sheet is an acknowledgment within the meaning of Section 19 of the
Limitation Act, and in order to be so, a balance-sheet in which such acknowledgment is
made need not be addressed to the creditor.
25. This Court has an occasion to consider the effect of an acknowledgement made by a
company in its balance sheets in several binding precedents. In the judicial
pronouncement reported at MANU/DE/1272/1998 : 73 (1998) DLT 593 Rishi Pal Gupta
v. S.J. Knitting and Finishing Mills Pvt. Ltd., this Court has held thus:
14. The respondent in its balance sheet for the year ending 31.3.1990 has
admitted that the petitioner is one of the sundry creditors of the respondent
Company and its name is shown in the list of sundry creditors in the said
balance sheet. The respondent has also admitted its liability in its reply dated
22.11.1991 whereunder it has transmitted the said balance sheet to the
Registrar of Companies. The Division Bench of this Court has also in its order
dated 29.11.1995 recorded that there is an admission of liability by the
respondent to the extent of Rs. 6,89,870.76 and that the said liability was
acknowledged by the respondent in its reply dated 22.11.1991. In view of the
aforesaid acknowledgment of debt in the balance sheet as also in the reply sent
by the respondent through one of its Directors Constituting acknowledgment in
writing within the meaning of Section 18 of the Limitation Act, the petition
presented by the petitioner on 14.5.1992 to enforce a liability of the Company
acknowledged in the balance sheet for the year ending 31.3.1990 is
indisputably within time. Reference may also be made to a decision of this
Court in Larsen & Toubro Ltd. v. Commercial Electrical Works and Ors. reported
in MANU/DE/0546/1997 : 67 (1997) Delhi Law Times 387 wherein this Court
referred to the decision reported in ILR 33 Cal 1033 wherein it was held that a
statement of accounts like balance sheet would constitute acknowledgment of
liability. The decisions relied upon by the Counsel for the respondent also have
taken the same view with which I respectfully agree.
26. In MANU/DE/1203/2004 : 115 (2004) DLT 529 R.K. Chemicals v. Kohinoor Paints
Faridabad Pvt. Ltd., in para 7, the court held thus:
7. .It is the balance sheet only, which can be relied for this purpose and that is
of 31st March, 1996. The claim is, therefore, time barred.
27. In MANU/DE/0546/1997 : 67 (1997) DLT 387 Larsen & Tubro Ltd. v. Commercial
Electric Works and Ors., the court also had an occasion to consider the legal impact of
an acknowledgement in a balance sheet and had held thus:
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 16. Mr. Jain learned Sr. Counsel for the defendants apart from arguing on
merits submitted that the suit was barred by time. Mr. Kohli the learned
Counsel for the plaintiff relied upon the letter written by the Income Tax Officer
in January 1981 to the defendants wherein the Income Tax Officer had said that
the defendants had shown in the balance sheet for the year ended 31.3.78 a
sum of Rs. 1,74,000/- as due from the defendants to the plaintiff and the
plaintiff, therefore, filed an application for a direction to the defendants to file
the balance sheet. Mr. Kohli learned Counsel for the plaintiff contends that the
balance sheet wherein the defendants itself had shown that particular amount is
due to the plaintiff would constitute an acknowledgment within the meaning of
Section 18 of the Limitation Act, 1963. As I had already noticed that the last
payment by cheque by the defendants was on 1.8.80, the plaint was presented
on 14.12.81, therefore, the suit is in time. I need not go into the question of
acknowledgment but it is well settled in ILR 33 Cal 1033 that such a statement
in accounts would constitute acknowledgment of liability. In any view of the
matter the suit is in time.
28. Section 18 of the Limitation Act requires a suit to be filed within three years of an
acknowledgement of the owing. In the pronouncement reported at MANU/TN/0116/1952
: AIR 1952 Mad 136 Rajah of Vizianagaram v. Official Liquidator, so far as limitation
based on such acknowledgement in a balance sheet was concerned, the court had held
thus:
(33) C.M.A. No. 252 of 1949: In this appeal, Arthur Stanley Lindley, the
petitioner in the Lower Court claimed a sum of £ 746-1-2 as being due to him
and the question here is one of limitation. The lower Court has held that it is
included in the item of £ 4897-7-7 relating to sundry creditors as contained in
the balance sheet Ex.P-1. In 'Jones v. Bellgrove Properties Ltd.' (1949) 2 K B D
700 the Court of Appeal held that where a balance sheet presented to the
shareholders at annual general meeting of a limited liability company signed by
the chartered accountants etc., contained the statement "to sundry creditors £
76381, 6s.10d" and it was proved by a witness from the firm of chartered
accountants which had signed the balance sheet that the debt of £ 1,807 owed
by the company to the plaintiff was included in the sum of £ 7638, 8s.10d.
stated in the balance sheet to be due to sundry creditors, the balance sheet
contained an acknowledgment to the plaintiff in writing signed by the agents of
the company that the debt of £ 1807 at the date of the annual general meeting
remained unpaid and due to the plaintiff. Therefore by virtue of Sections 23 and
24 of the Limitation Act, 1939, the debt was held to be recoverable. Mr.
Tiruvenkatachari contends that this decision should not be applied and is
erroneous. On the other hand Mr. Rajah Ayyar contends that the observations of
the Privy Council in 'Maniram Seth v. Seth Rupchand' 33 Cal 1047 at p.1060 are
to the effect that the provisions of the Limitation Act in England regarding
acknowledgment are more stringent than what they are in India. We have not
been shown any reason why the judgment of the Court of Appeal should not be
followed by us. From the affidavit submitted by John Hawkins, it is clear that
£ 746-1-2 is included in the debts due to sundry creditors. In these
circumstances we feel that the decision of the District Judge is right and this
appeal is dismissed with costs.
29. The High Court of Punjab & Haryana also had an occasion to consider this issue. In
its pronouncement reported at MANU/PH/0099/1958 : AIR 1958 Punjab 341 Lahore
Enamelling and Stamping Co. Ltd. v. A.K. Bhalla and Ors., the court laid down the
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principles thus:
37. All the claims mentioned above are acknowledged in the balance sheet for
the year ending 31-12-1950. In two cases the specific amounts are shown to be
due to the Managing Director (Shri Bhagwan Das) and to technical expert (Shri
A.K. Bhalla). Loans due to unsecured creditors are stated to be Rs.
1,22,099/10/9.
There is evidence on the record to show that the above amount includes sums
due to Shrimati Yash Kumari Bhalla and Dr. Tara Chand, vide Exhibit P.1. All
these entries constitute an acknowledgment of the debts due to the claimants
within the meaning of Section 19 of the Indian Limitation Act.
Debts due to creditors not mentioned by name but included in the item relating
to "Loans (unsecured)" or as due to "Sundry Creditors" mentioned in the
balance sheet amount to an acknowledgment within the provisions of Section
19 of the Indian Limitation Act, so as to extend the period of Limitation Act with
effect from the date of the signing of the acknowledgment. For this proposition,
reference may be made to Rajah of Vizianagaram v. Vizianagaram Mining Co.
Ltd. MANU/TN/0116/1952 : AIR 1952 Mad 136 (U) : 1918 Mad WN (SN) 48
(V); and Jones v. Bellegrove Properties Ltd. (1949) 1 All ER 498 (W). The facts
of the last case were that in 1936 the plaintiff had lent a sum of £ 1,807 to the
defendant company in which he was a shareholder. At the annual general
meeting of the company in December, 1946, the plaintiff was handed by a
director the accounts of the company, signed by the accountants and two
directors, which included the balance sheets for the years 1939 to 1945, in each
of which was the entry Sundry creditors £ 7,638 8s.lod.
It was held by the King's Bench Division that parol evidence was admissible to show
that the sum mentioned in the entry included the debt due to the plaintiff; and further
that the entry, thus explained, constituted an acknowledgment within the meaning of
the Limitation Act, 1939, Sections 28(4) and 24(1).
30. Apart from the admissions contained in the balance sheets, perusal of the record
shows that the first payment by the plaintiff was made to the defendant on 16th
December, 1998. The plaintiff has urged that it has maintained running account of the
amounts advanced and the amounts received from the defendant. The first repayment
by the defendant was by a cheque dated 16th September, 2000 for Rs. 4.00 lakhs.
Clearly this partial payment on account of the debt was made before expiry of the
prescribed period of limitation computed from the date of the plaintiff's payment on the
16th of December, 1998. Consequently, in terms of Section 19 a fresh period of
limitation would require to be computed from 16th September, 2000 when this cheque
was paid. Likewise, the second and third payment of Rs. 50,000/- and Rs. 1,00,000/-
were made by way of cheque dated 2nd March, 2001 and 15th March, 2001. Three
further cheques were given by the defendant in February and March, 2004. The last
payments from the defendant in this case have been made by cheque No. 690246 dated
12th April, 2004 for the sum of Rs. 18,00,000/- and vide cheque dated 15th April, 2004
bearing No. 690248 for the amount of Rs. 11,00,000/-. The debt in the present case,
therefore, is by no means time barred. The initial suit is within time from the date of
payments made by the defendant by the cheque Nos. 513249, 513248 and 513247, the
first was dishonoured on 19th January, 2004 and the other two on 9th March, 2004. The
amended suit is within three years from the last payments which were made by the
defendant vide cheque Nos. 690246 and 690248 dated 12th April and 15th April, 2004

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respectively as also dishonouring of the cheque No. 690427 which was dishonoured on
22nd July, 2004.
31. It is noteworthy that each of these payments was within three years of the last
payment and on each date limitation would require to be computed afresh from the date
when the payments were rendered. On these facts alone, the present suit having been
filed on 29th March, 2004 would have to be held within limitation.
32. The defendant can claim no benefit from the act of dishonouring of the cheque. It is
well settled that dishonouring of the cheque would not wipe out an advantage of
extension of limitation which is earned by the creditor on the issuance of such cheque.
(Ref: MANU/DE/0694/1997 : AIR 1998 Delhi 80 para 6-15 Rajesh Kumari v. Prem
Chand Jain; decision dated 5th September, 2005 rendered in CS (OS) No. 2342/1998
Hindustan Petroleum Corporation v. Tajiskstan International Airlines).
33. There is yet another aspect to the objection relating to the suit being barred by
limitation. The defendant has admittedly issued a letter dated 2nd September, 2001
wherein it has stated thus:
Dated: 2nd September, 2001
To,
S.C. Gupta & Bros.
240, Top Floor,
Satya Niketan,
New Delhi-100021
Kind attn: Mr. S.C. Gupta
Dear Sir,
This is to certify that the loan amount of Rs. 64.30 lakhs (Rs. Sixty Four Lacs
Thirty Thousand only) outstanding, payable to you in our records as on 31st
March, 2001.
For: Allied Beverages Co. Pvt. Ltd.
Sd/-
Asst. Manager Accounts
(Uma Shanker Gupta)
Herein contained is an acknowledgement that the loan amount of Rs. 64.30 lakhs is
outstanding and payable by the defendant and the same has been advanced after the
31st of March, 2001. The present suit has been filed within three years of
acknowledgement made by the defendant.
34. I further find that in the Memorandum of Understanding dated 1st April, 2004, the
defendant has yet again acknowledged and admitted that it owes a sum of Rs.
72,80,000/- to the plaintiff which it has taken as a loan by way of cheques and drafts.
There is a clear and unequivocal acknowledgement that this loan is duly reflected in the
books of account i.e. the balance sheet. The relevant extract of this MOU reads thus:
Whereas the first party owes to the second party a sum of Rs. 72.80 lacs (Rs.
Seventy Two Lacs Eighty Thousand only) which the first party has taken as loan
from the second party by way of cheque/draft/. The said loan is also reflected
in books of accounts i.e. Balance Sheets of the first party.
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 Whereas the first party has not been able to pay the second party the loan
amount mentioned above and therefore the first party has approached the
second party for amicable settlement of its dues. Now this MOU witnessed as
under:
1. That the first party hereby confirms and acknowledges that a sum of
Rs. 72.80 lacs (Rs. Seventy Two Lacs Eighty Thousand only) is payable
by the first party to second party towards the loan advance by the
second party to first party.
Certainly, this statement is also an acknowledgement of the debt of the
defendant within the meaning of Section 18 of the Limitation Act.
3 5 . The defendant has urged at great length that issuance of every cheque was an
independent transaction and that so far as the owings of the defendant are concerned,
the same would lapse so far as the amount of a particular cheque was concerned, on
expiry of period of three years from the date of its issuance.
36. I find that the plaintiff has maintained a running account so far the transactions
with the defendant are concerned. The loan transactions have been made through
cheques and demand drafts and repayments have come through the same mode. The
plaintiff has extended amounts to the defendant-company from time to time and the
defendant has made partial payments from time to time. Thus, in the instant case, in my
view, the limitation would not commence on expiry of the prescribed period from date
of issuance of each cheque.
37. There is yet another angle to this case. It is well settled that in order to maintain a
suit against the defendant, there must accrue cause of action for filing the same. In the
instant case, there was no occasion for the plaintiff to believe that the loan taken by the
defendant would not be repaid. The defendant did tender some cheques which were
honoured. The defendant had also acknowledged the amounts due in its letter dated
2nd September, 2001. Therefore, inasmuch as the defendant kept acknowledging the
loan, the same would amount to a promise to pay the plaintiff towards the loan. The
first time that the cheques were dishonoured were on 19th February, 2004, and 9th
March, 2004.
38. The question which needs to be answered is as to when the cause of action could
be said to have accrued to enable the filing of the suit. In this behalf, it would be
appropriate to advert to the observations of the Apex Court in its judgment reported at
MANU/SC/0542/1999 : (1999) 8 SCC 122 SAIL v. J.C. Budhiraja, wherein the court held
thus:
28. Learned Counsel for the respondent relied upon the decision of this Court
in Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority for
contending that cause of action for referring the claim arises only when the
appellant disputed the right of the respondent to recover the damages claimed
by him. In the said case, the Court has observed that on completion of the
work, the right to get payment would clearly arise, but wherein the final bills
have not been prepared and when the assertion of the claim was made on 28-2-
1983 and there was non-payment, the cause of action arose from that date. In
that case, application under Section 20 was filed in January 1986. The Court
also observed that: (SCC p.340, para 4)
It is also true that the party cannot postpone the accrual of cause of
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 action by writing reminders or sending reminders but where the bill
had not been finally prepared, the claim made by a claimant is the
accrual of the cause of action. A dispute arises where there is a claim
and a denial and repudiation of the claim. The existence of dispute is
essential for appointment of an arbitrator under Section 8 or a
reference under Section 20 of the Act. See Law of Arbitration by R.S.
Bachawat, 1st Edn., p.354. There should be dispute and there can only
be a dispute when a claim is asserted by one party and denied by the
other on whatever grounds. Mere failure or inaction to pay does not
lead to the inference of the existence of dispute. Dispute entails a
positive element and assertion of denying, not merely inaction to
accede to a claim or a request. Whether in a particular case a dispute
has arisen or not has to be found out from the facts and circumstances
of the case.
Therefore, a dispute arises when the plaintiff made a claim which was denied
by the defendant. In the instant case, the disputes having arising when the
cheques were first dishonored on 19th February, 2004, then on 9th March, 2004
and again when the cheque dated 15th April, 2004 has got dishonoured on
22nd July, 2004. it is only by such dishonouring of the cheques that the
plaintiff would have got an indication that the defendant did not intend to
honour its commitment. As such, the plaint as initially filed and the amended
plaint within three years of the accrual of the cause of action is clearly within
limitation.
39. It is equally well settled that bouncing of cheque would not have any effect on the
impact of the tender of cheque so far as limitation is concerned. In this behalf, the
pronouncement of this Court reported at MANU/DE/0694/1997 : AIR 1998 Delhi 80 para
6-15 Rajesh Kumari v. Prem Chand Jain; and decision dated 5th September, 2005
rendered in CS (OS) No. 2342/1998 Hindustan Petroleum Corporation v. Tajiskstan
International Airlines (para 13) deserve to be adverted to.
40. The defendant has urged at great length that so far as the amount actually due and
payable by the defendant is concerned, it cannot be determined from the pleadings or
the documents as filed and that evidence requires to be led in this behalf before
ascertainment of the liability. It is contended that the defendant is entitled to challenge
such evidence and cross examine the plaintiff and his witnesses. Mr. T. Nath, learned
Counsel for the defendant has urged that the defendant is consequently entitled to leave
to defend.
41. I find that the plaintiff has placed complete details of the cheques which have been
issued towards the loan advanced to the defendant. The amounts received from the
defendant have also been detailed and statements of account have also been filed as
Annexure 'A' to the amended suit. The amount which was advanced by the plaintiff is
acknowledged in the balance sheet of the defendant. The plaintiff has asserted that it
has paid an amount of Rs. 64.30 lakhs and additionally, Rs. 3.50 lakhs on 21st April,
2001. The plaintiff has further advanced an amount of Rs. 5 lakhs on 24th April, 2001.
Against this, the defendant has repaid an amount of Rs. 18.00 lakhs on 12th April, 2004
and Rs. 11.00 lakhs on 15th April, 2004 leaving a balance amount due and payable by
the defendant of Rs. 43,80,000/-. The payments made by the defendant stand duly
stated before this Court. The cheques which were issued and dishonoured have been
placed on record.

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Dr. Ram Manohar Lohiya National Law University
42. The defendant has not urged that it has made any other payment to the plaintiff. In
these circumstances, even the amount which the defendant is liable to pay to the
plaintiff is clearly established on record.
43. The defendant has objected that the suit claim is not covered under the definition of
debt and liquidated demand under Order 37 of the Code of Civil Procedure. This
objection is taken up last for consideration as it entails consideration of the various
documents noticed hereinabove. In this factual background, it now becomes necessary
to consider the meaning assigned to the expression 'debt' and 'liquidated demand' in
judicial pronouncements. The expression 'debt' has arisen for consideration in several
cases prior hitherto. In MANU/DE/0870/2000 : AIR 2000 Delhi 156 (para 10) S.B.
Electricals v. Sylvania Laxman, the court held thus:
1 0 . The plaintiff's reliance on Food Corporation of India v. Bal Krishan
MANU/DE/0208/1981 : (1982) 21 Delhi LT 167 which is a Division Bench
judgment of this Court, is also misplaced. A reading of this decision discloses
that 500 Rolls of black polythene film had been supplied pursuant to a tender.
The defence against payment was, inter alia, that Order XXXVII did not apply
since the goods supplied, upon subsequent examination, were found deficient
and inferior in quality, and that interest had not been agreed upon in writing.
These objections were negatives and the relevant paragraphs read as follows:
Regarding the objection as to the maintainability of the suit raised by
the appellant appellants, we are of the view that where the suit is for
recovery of the price of the goods, it should be construed as a suit for
enforcing payment of a debt, within the amended Clause (b) of Sub-
rule (2) of Rule 1 of Order 37, C.P.C. which covers a few more
categorises of suits and not being inconsistent with Rule 1 of Chapter
XV of the Original Side Rules will govern the present suit, vide Rule 12
of the said Rules, as explained in Printpack Machinery Ltd. v. Jay Kay
Paper Congeters MANU/DE/0074/1979 : AIR 1979 Delhi 217, Avadh
Behari J. in Sushila Mehta v. Shri Bansi Lal Arora and Anr. I.A. 3032/81
: Suit No. 93/81, decided on 26.10.1981, has held that the amendment
of Order 37, CP.C. is neither repugnant nor inconsistent with Chapter
XV of the Original Side Rules, and a suit on a debt arising out of a
written contract can be brought under the summary procedure. We are
in respectful agreement with that view. What then, is a debt? Relying in
Webb v. Stention (1883) 11 OBD 518 it was held in Commissioner of
Wealth Tax v. Pierce Leslie and Co. Ltd. MANU/TN/0123/1963 : AIR
1963 Mad 356, that the essential requisites of a debt are (1) an
ascertained or readily calculable amount; (2) an absolute unqualified
and present liability in regard to that amount with the obligation to pay
forthwith or in future within a time certain; (3) the obligation must
have accrued and be subsisting and should not be that which is merely
accruing. A contingent liability or a contingency debt is, therefore,
neither a liability nor a debt. A debt is a 'debitum in praesenti,
solvendum in future.' We, therefore, hold that the amount payable
under an unqualified present liability. the obligation has accrued and
subsists. It is a debt accruing under a written contract. The learned
Counsel for the defendant wanted to urge that the words "arising on a
written contract" must be read along with the word "interest" and since
no interest was payable under the contract the suit is not covered by
clause (b) of Rule 2 of Order 37, C.P.C. This is an argument totally
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 unsupportable. The words "arising on a written contract" apply to the
word "debt" which may be "with or without interest". We therefore,
without any hesitation reject this contention of the appellant.
44. It would be useful to consider the observations of this Court in the pronouncement
reported at MANU/DE/0208/1981 : 21 (1982) DLT 167 FCI v. Bal Krishan Garg, wherein
the court had held thus:
7. What then, is a debt? Relying in Webb v. Stenton (1883) 11 QBD 518 it was
held in Commissioner of Wealth Tax v. Pierce Leslie & Co. Ltd.
MANU/TN/0123/1963 : AIR 1963 Madras 356, that the essential requisites of a
debt are (1) an ascertained or readily calculable amount; (2) an absolute
unqualified and present liability in regard to that amount with the obligation to
pay forthwith or in future within a time certain; (3) the obligation must have
accrued and be subsisting and should not be that which is merely accuring. A
contingent liability or a contingency debt is, therefore, neither a liability nor a
debt. A debt is a 'debitum in praesenti, solvendum in futuro.' We, therefore,
hold that the amount covered by the suit is an ascertained amount payable
under an unqualified present liability. The obligation has accrued and subsists.
It is a debt accruing under a written contract. The learned Counsel for the
defendant wanted to urge that the words 'arising on a written contract' must be
read along with the word 'interest' and since no interest was payable under the
contract the suit is not covered by Clause (b) of Rule 2 of Order 37 Code of
Civil Procedure, 1908. This is an argument totally unsupportable. The words
'arising on a written contact' apply to the word 'debt' which may be 'with or
without interest'. We therefore, without any hesitation reject this contention of
the appellant.
45. It would also be appropriate to advert to the observations of the High Court of
Judicature at Madras in its pronouncement reported at MANU/TN/0123/1963 : AIR 1963
Mad 356 which reads thus:
7. Debt is a common expression and it is difficult to believe that it can give rise
to any controversy in interpreting it. Broadly stated it is a liquidated money
obligation for the recovery of which an action will lie. It is an ascertained
liquidated quantified obligation enforceable 'in praesenti' or 'in futuro'. A debt
must be a "debitum" that is due. The fact that the time for payment will arise in
future does not make it any the less a debt. 'Debitum in praesenti, solvendum
in futuro' - this is not repugnant to the conception of a debt, because the
obligation is crystallised and it is only the payablity that is in abeyance, but a
debt has to be distinguished from what can only be described as something
which will probably or partly ripen into a debt. A future contingent liability is
not a debt due and owing. It is not only not due but being contingent never
may become due. An inchoate liability with a fair prospect of maturity into a
debt in future and still in its embryo stage would not answer the description of
a debt. Till it is born it is not a debt. Every kind of liability, immature, formative
and in the course of evolution to become a debt, cannot be called a debt in
anticipation of the ultimate.
In a later part of the judgment, in para 10, the court held that a contingent debt is not a
debt until the contingency happens. In para 11 of the pronouncement, essential
requisites of the debt were laid down thus:

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 1 1 . ...The essential requisites of a debt are therefore (1) an ascertained or
readily calculable amount; (2) an absolute unqualified and present liability in
regard to that amount with the obligation to pay forthwith or in future within a
time certain; (3) the obligation must have accrued and subsisting and should
not be that which is merely accruing.
4 6 . So far as the expression 'liquidated demand' is concerned, the same has been
interpreted in MANU/DE/0040/1990 : AIR 1990 Delhi 278 Rajender Kumar Khanna v.
OIC, wherein the court held thus:
3. The industry of counsel had not been able to produce a single precedent of
courts in India, which explained what is 'liquidated demand'. However,
reference has been made to Words & Phrases Permanent Edition, in which
reference is made to Rifkin v. Safenovitz 40 A 2d 188. It is stated that "amount
claimed to be due is a 'liquidated demand' within statute authorizing summary
judgments if it is susceptible of being made certain in amount by mathematical
calculations from factors which are or ought to be in possession or knowledge
of party to be charged.
xxxx xxxx xxxx

6. As a result of the claim, made by the petitioner, a surveyor was appointed by

the Insurance Company, who gave a report of damage in terms of percentage,
to the cargo of dry dates. It is the plaintiff's case that this damage in
percentage is capable, by arithmetical calculation of being quantified into the
amount of damage actually sustained to the cargo, vis-a-vis the amount for
which they were insured, and, therefore, the damage in percentage is a
'liquidated demand' within the meaning of Order XXXVII of the Code of Civil
Procedure.
xxxx xxxx xxxx

12. In view of the provisions of the insurance policy, the provisions of item 14
of the Schedule to the Insurance Act, the provisions of Section 64-UM of the
Insurance Act, the percentage loss suffered to the dry dates as evidenced by the
report of the surveyor, in my view, is capable, by an arithmetical calculation, of
arriving at a determinable sum, which sum would constitute a 'liquidated
demand' within the meaning dicta in Rifkin v. Safenovitz (supra), and the
provisions of Order XXXVII of the Code of Civil Procedure.
In the preceding paragraphs, I have noticed the computation of the amounts claimed is
based on additions and subtractions of the amounts of the cheques which is enabled by
simple arithmetical calculation ascertainment of the amount payable by the defendant.
4 7 . My attention has been drawn to the pronouncement of this Court reported in
MANU/DE/0483/1997 : 67 (1997) DLT 13Daya Chand Uttam Prakash Jain v.
Santosh Devi Sharma. The court has extensively considered the law on what would
constitute a 'debt' which is with instructive and apposite and deserves to be considered
in extenso. It was discussed and held thus:
9. In Food Corporation of India v. Bal Krishan Garg MANU/DE/0208/1981
: 21 (1982) DLT 167, a Division Bench of this Court considered the requisites
of debt in connection with the suit for recovery of the price of goods. It was
held to be maintainable under Order 37, Code of Civil Procedure, 1908 by
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 treating the unpaid price as debt. In regard to 'Debt' following observations of
the Division Bench of this Court in para 7 are relevant here.
7. What there is a debt? Relying in Webb v. Stenton (1883) 11 QBD 518 it was
held in Commissioner of Wealth Tax v. Pierce Leslie & Co. Ltd.
MANU/TN/0123/1963 : AIR 1963 Madras 356, that the essential requisites of a
debt are (1) an ascertained or readily calculable amount; (2) an absolute
unqualified and present liability in regard to that amount with the obligation to
pay forthwith or in future within a time certain; (3) the obligation must have
accrued and be subsisting and should not be that which is merely accruing. A
contingent liability or a contingency debt is, therefore, neither a liability nor a
debt. A debt is a 'debitum in praesenti, solvendum in futuro.' We, therefore,
hold that the amount covered by the suit is an ascertained amount payable
under an unqualified present liability. The obligation has accrued and subsists.
It is a debt accruing under a written contract.
10. The term "written contract" in the words of Black's Law Dictionary (6th Ed.)
means as under:
To "acknowledge" is to admit, affirm, declare, testify, avow, confess or
own as genuine, Favello v. Bank of America Nat. Trust & Savings
Ass'n 24 Cal App. 2d 342 74 P.2d 1057m 1058. Admission or
affirmation of obligation or responsibility. Weyerhaeuser Timber Co.
v. Marshall, C.C.A. Wash. 102 F.2d 78, 81. (sic) states have adopted
the Uniform Acknowledgment Act. The debtor's acknowledgement of
the creditor's debt and or right of action that will revive the
enforceability of a debt barred by the statute of limitations. Part
payment of obligation which tolls statute of limitation is a form of
acknowledgement of debt. In re: Badger's Estate 156 Kan. 734. 137
P. 2nd 198 205.
11.2 According to Stroud's Judicial Dictionary acknowledgement means as
under:
(1). an acknowledgement, in writing of a debt...so as to take
such debt out of the Limitation Act.... (1) must admit that debt
is due, and (2) promise, or justify the inference of promise, of
payment unconditionally, or (if conditionally) it must be shown
that the condition has been accomplished.... A statement in a
balance sheet presented to a creditor-shareholder of a
Company and signed by the Directors or their agents is
sufficient acknowledgement (Jones v. Bellgrove Properties
(1949) 2 K.B. 700), and an acknowledgement is within the section if it
indicates that a debt is due, even if it does not state the amount
(Dungate v. Dungate (1965) 1 W.L.R. 1577). But a signature on a
balance sheet, notwithstanding that the debt appeared therein, was
held not to be a sufficient acknowledgement (Consolidated Agencies
v. Bertram (1965) to be a sufficient acknowledgement by one of the
several executors suffices (ReMacdonald [1897] 2 Ch. 181,
distinguishing Tullick v. Dunn, Ry. & Moo. 416, and Scholey v.
W a l t o n 13 L.J. Ex. 122; see Astbury v. Astbury, infra).
"Acknowledges the claim" (Section 23(4) means "acknowledgement the
debt or other liquidated pecuniary amounts" (Good v. Parry [1963] 2

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 W.L.R. 846). "Acknowledgement" (Section 24(1) means
acknowledgement of liability....
(2) "An acknowledgement of a DEED, or SPECIALITY, by writing or part
payment or part satisfaction (Civil Procedure Act, 1833 (c.42), Section
5 will suffice if it contains a clear admission of the speciality debt (see
Moodie v. Bannister 28 L.J.Ch. 881; Howcutt v. Bonser 3 Ex. 499;
Forsyth v. Bristowe 8 Ex. 721, [See also Read v. Price (1909) 1 K.B.
7; affirmed (1909) 2 K.B. 724, cited PARTY LIABLE, where it was held
that parole evidence is admissible to prove the contents of a written
acknowledgement which has been lost; see now Limitation Act, 1939,
Sections 23, 24. As to acknowledgement is writing within Civil
Procedure Code, 1908, Section 5 see Viscount Burnham v. Atlantic
& Pacific Fibre Importing & Manufacturing Co. Ltd. 44 T.L.R. 702.
1 1 . 3 I n Elvira Rodrigues v. Godnicalo Hypolito Constancio
MANU/PR/0132/1934 : AIR 1934 PC 144, it was observed as under:
Their Lordships think that what has been forgotten is that there are two
forms of account stated. An account stated may only take the form of a
mere acknowledgement of a debt, and in those circumstances, though
it is quite true it amounts to a promise and the existence of a debt may
be inferred, that can be rebutted, and it may very well turn out that
there in no real debt at all, and in those circumstances there would be
no consideration and no binding promise. But on the other hand, there
is another form of account stated which is a very (sic.)form as between
merchants in business in which the account stated is an account which
contains entries on both sides, and in which the parties who have
stated the account between them have agreed that the items on one
side should be set against the items upon the other side and the
balance only should be paid; the items on the smaller side are set off
and deemed to be paid by the items on a larger side, and there is a
promise for good consideration to pay the balance arising from the fact
that the items have been so set off and paid in the way described.
Their Lordships were further of the view that:
That was done.
The man writes on account which was demanded by the servant for the
express purpose of knowing what sum he would be entitled to get and
which, it seems to their Lordships, was stated by the Managing Partner
of the business, for the sole purpose of enabling the servant to know
what his final remuneration was to be. To make quite clear that it was
intended to express something in the nature of an obligation he
authenticated the document and that can be the only effect of that
particular part of the transaction-by writing his signature over two 10
cent stamps.
In their Lordships' view, that was a plain case of a promise made to
pay the balance for a good consideration. One cannot help thinking that
if an account stated in those circumstances did not give rise in Kenya to
the promise to pay, and for a good consideration, Kenya would be
certainly without one of the most ordinary business facilities which has
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 been common to everybody who carries on business under any system
which incorporates any of the ordinary principles of English contract
law.
(Emphasis supplied)
11.4 In Gharabharan v. Sri Radha Kishan and Ors. MANU/UP/0064/1958 :
AIR 1958 All. 313, a Division Bench of the Allahabad High Court about 'account'
stated as under:
(12)...Where the accounts contain a series of cross-entries, one
evidencing payment of loans advanced at various times by the creditor
and the other evidencing payment of amounts paid towards the same
loans at various times by the debtor, and the parties agree to set one
series of entries against the other and after doing the same, finally
arrive at an agreed balance, the final settlement of accounts
thus made constitutes an "account stated.
That fact that both the entries relate to the same transaction of loan does not
take the transaction out of the category of "account stated", nor does it make
the transaction a unilateral one. Such a transaction is really a bilateral one as
both the parties have met together and after mutual accounting in respect of the
advances made by the one and payments made by the other have finally agreed
by a joint application of their minds to treat a certain specific figure as the
amount due on that date. Both the parties participating in this
transaction have combined in finally adjusting their rights.
They have jointly co-operated in wiping off their previous or antecedent rights
and liabilities and substituting therefore a new or a fresh right and liability. The
procedure of surrender and discharge involved in such a transaction
for the purpose of arriving at an agreed settlement is truly a bilateral
one. The process of "give and take" which such a transaction demands
from either side, itself constitute a sufficient consideration which is
enough to sustain the fresh agreement as valid in law.
Reference in this connection might be made to the case of Bishnu Chand v.
Girdhari Lal MANU/PR/0029/1934 : AIR 1934 All. L J 623 : ILR 56 All 376 :
AIR 1934 PC 147 (A) in which their Lordships of the Privy Council have
expounded the law in this regard. Then such an "account stated" is signed by
the party sought to be made liable or its duly authorised agent, the "account
stated" as envisaged in Article 64 is created. Such an "account stated" gives
rise to a new cause of action and a suit brought within three years of the date
of such a cause of action is not barred by limitation. Such a suit cannot be
thrown out on the ground that some of the items intecedent to the date of the
"account stated" were barred by limitation. Previous rights and liabilities having
been swept away by the concerted and agreed Will and action of parties
themselves, the previous items which formed the material for arriving at the
agreed figure must, for the purposes of the suit, be eliminated from
consideration, and a fresh cause of action be deemed to be born on the date on
which such a transaction is entered into. In such a situation, it is not open to
the Court to reopen the closed transaction and to scrutinise the antecedent
entries for the purpose of applying the bar of limitation. Such a procedure
would be the very negation of the real purpose of "account stated" and would
constitute a violation of fundamental principles underlying the legal doctrine of
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 "account stated". In the present case, there is also no manner of doubt that this
"account stated" was signed by a partner of the firm. Every partner of a firm
has in law an inherent right to do it, and must, therefore, be presumed to act as
such.
11. It was said that it has not been pleaded that the suit is based on a written
contract. This is not required by any provision of law. The Court has to find out
whether the suit has been brought upon a negotiable instrument or a written
contract or an enactment should guarantee to which Order 37, C.P.C. applies.
The acknowledgement of Rs. 1,00,000/- by the defendants for the purposes
allotment of shares as application money therefore clearly amounts to a
contract. Because it is their own case that the plaintiff paid allotment of shares
and they accepted it. There was "consensus of mind". And "consensus of mind"
leads to a contract, as Lord Caizns siad. (Cundy v. Lindsay (1878) 3 AC 459
(2) at p. 465). There was promise. There was consideration. There was
acceptance. All the elements essential for the formation of the contract are
present. What more is needed to make a contract. It was not a nudum pactum.
(Emphasis supplied)
48. From the foregoing, it is evident that the balance sheets of the defendant company
clearly amounted to acknowledgement of debt in the light of the principles laid down in
the foregoing judgments. In Daya Chand Uttam Prakash Jain v. Santosh Devi Sharma
(supra), this Court has held that 'an acknowledgement' would amount to 'written
contract' and that acknowledgement implies present liability with an obligation to pay.
Such written acknowledgement satisfies all essential elements of a written contract.
I therefore, find force in the submission on behalf of the plaintiff that the suit based on
the balance sheets of the defendant-company would by itself be maintainable and
covered under clause 2(b)(i) of Rule 1 of Order 37 of the Code of Civil Procedure, 1908.
49. There can be no dispute that the reliance by the plaintiff on the Memorandum of
Understanding dated 1st April, 2004 would also be covered under the same clause of
Order 37 in as much as such Memorandum of Understanding would constitute a written
contract. Undoubtedly, in the instant case, the defendant has failed to abide by the
Memorandum of Understanding resulting in the plaintiff being entitled to submit that the
same was not binding on its very terms.
50. Learned Counsel for the defendant has placed reliance on the pronouncement of the
Apex Court reported in 1970 (21) FLR 387 Management of Consolidated Coffee Estate
Ltd. v. The Workmen to support the defendant's submission that it was entitled to the
leave to defend the suit. I find that in this case the issue raised before this Court was
whether the workmen were entitled to bonus. The workmen had placed reliance on the
amount so reflected in the profit and loss account and balance sheet of the company. In
the facts of the case, the court arrived at a conclusion that the company could not have
known the amount of bonus it ultimately would have to pay while preparing its balance
sheet for the year in question and that the amount shown as bonus in its balance sheet
and profit and loss account for the year in question could therefore, be at best an
estimated amount. For this reason, the amount reflected as bonus was held not to be an
admission of liability to pay.
In the instant case, there is no estimate involved in the amount reflected by the
company as its owings to other persons and the admission of the amount is clear and
unequivocal.
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51. In (1983) 3 SCC 410 Central Bureau of Investigation v. V.C. Shukla and Ors., the
court was considering the probative value of entries in the books of accounts.
Furthermore, the court considered the entries made by certain persons in notebooks.
The court had held that such entries were in the nature of statements which could be
treated as an admission against the accused persons provided that they related to any
fact in issue or to a relevant fact.
So far as the books of accounts were concerned, the court had stated that the rationale
behind the law of admissibility of books of accounts is that the regularity of habit, the
difficulty of falsification and the fair certainty of ultimate detection give them in a
sufficient degree a probability of trustworthiness. Since there is an element of self-
interest and partisanship of the entrant to make a person liable, behind whose back and
without whose knowledge, the entry is made, an additional safeguard of insistence upon
other independent evidence to fasten him with such liability has been provided in
Section 34 of the Evidence Act.
These observations were made in a criminal prosecution wherein the prosecution was
relying on diaries and records made by accused persons against other co-accused.
In the instant case, the entries in the books of account are duly corroborated in the
balance sheets as well as in the admissions of the defendant in its correspondence with
the plaintiff as also the afore-noticed Memorandum of Understanding dated 1st April,
2004. Therefore, such corroboration as is envisaged under Section 34 of the Indian
Evidence Act is also available.
52. So far as the pronouncement of this Court reported in MANU/DE/0526/2004 : 2004
(76) DRJ 32 Krishna Finhold Pvt. Ltd. v. Gupta & Co. and Anr. is concerned, this case is
distinguishable on facts from the present case. Before this Court, there is no ambiguity
in the amount payable by the defendant in the light of the statements made in the
several documents noticed hereinabove. In Krishna Finhold Pvt. Ltd. v. Gupta & Co. and
Anr., the terms of the loan as to the period for which the loan was granted and other
material terms of the agreement were not clear and for this reason, the court was of the
view that leave to defend is granted to the defendant. There is no such issue in the
present case.
53. So far as the grant of leave to defend to a defendant in a suit under Order 37 is
concerned, the principles which would guide the court are well settled. In this behalf,
reliance can be placed on the pronouncement of the Apex Court in MANU/SC/0013/1958
: (1958) SCR 1211 Santosh Kumar v. Mool Singh, wherein the court summed up the
principles thus:
(a) If the defendant satisfied the Court that he has a good defence to the claim
on merits, the defendant is entitled to unconditional leave to defend.
(b) If the defendant raises a triable issue indicating that he has a fair or
bonafide or reasonable defence, although not a possibly good defence, the
defendant is entitled to unconditional leave to defend.
(c) If the defendant discloses such facts as may be deemed sufficient to entitle
him to defend, that is, if the affidavit discloses that at the trial he may be able
to establish a defence to the plaintiff's claim, the court may impose conditions
at the time of granting leave to defend the conditions being as to time of trial
or mode of trial but not as to payment into court or furnishing security.

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Dr. Ram Manohar Lohiya National Law University
 (d) If the defendant has no defence, or if the defence is sham or illusory or
practically moonshine, the defendant is not entitled to leave to defend.
(e) If the defendant has no defence or the defence is illusory or sham or
practically moonshine, the court may show mercy to the defendant by enabling
him to try to prove a defence but at the same time protect the plaintiff imposing
the condition that the amount claimed should be paid into court or otherwise
secured.
54. These principles were reiterated by the Apex Court in MANU/SC/0334/1998 : JT
1998 (3) SC 341 Sunil Enterprises and Anr. v. SBI Commercial and International Bank
Ltd.
55. The defendants have admitted liability in the balance sheets, correspondence and
the Memorandum of Understanding. The plaintiff has filed a detailed affidavit clearly
setting out the owings of the defendants. No other payment is claimed by the
defendants. There is also no material dispute nor any issue to the payments made by
the plaintiff to the defendants.
56. So far as interest is concerned, there is no claim of pre-suit interest. The plaintiff
has prayed for pendente lite and future interest at the rate of 18% per annum. It is well
settled that the power to grant pendente lite and future interest vests in the court under
Section 34 of the Code of Civil Procedure and certainly there can be no prohibition to
the maintainability of the present suit on the ground that the plaintiff has incorporated a
prayer for pendente lite and future interest.
In the instant case, I have no manner of doubt that the defendant has failed to raise the
triable issue or that he has a fair or bonafide or reasonable defence to the case of the
plaintiff. The defendant has not disclosed any such fact which could be considered
sufficient to entitle him to leave to defend the present suit. In fact, the case of the
plaintiff is established from the documents executed by the defendant itself. There is
therefore no merit in the present application.
57. In the light of the above, it has to be held that the objections of the defendant are
wholly without merit and the defence disclosed in support of the leave to defend do not
require adjudication.
These principles clearly apply to the defence raised by the defendant which
consequently deserves to be rejected.
I therefore, find no merit in the case by the defendant in this application and
consequently, the present application is hereby dismissed.
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